Skip to main content
Income Tax

Personal Allowance Explained

4 min read · Reviewed 15 Jul 2026

The Personal Allowance is the amount you can earn each tax year before paying Income Tax. This guide explains how it works, when it is reduced and how it interacts with your tax code.

What the Personal Allowance is

The Personal Allowance is a tax-free slice of income. You only start paying Income Tax on earnings above it. Most people are entitled to the standard allowance for the tax year.

When the allowance is reduced

The allowance is not unlimited for high earners. Once your income passes £100,000, the allowance is reduced by £1 for every £2 of income above that level. This creates an effective higher marginal rate on income in that range.

This taper is why some people just above £100,000 see an unusually high effective tax rate on part of their income.

Your tax code and the allowance

Your tax code is how HMRC tells your employer how much Personal Allowance to give you across the year. Certain circumstances — like the Marriage Allowance, taxable benefits or underpaid tax from a previous year — can change your code and therefore your allowance.

Key takeaways

  • The Personal Allowance is your tax-free income for the year.
  • You pay Income Tax only on income above it.
  • It is reduced by £1 for every £2 earned above £100,000.
  • Your tax code reflects the allowance your employer applies.

Frequently asked questions

Can I lose my Personal Allowance completely?
Yes. Because of the taper above £100,000, the standard allowance can be reduced to zero at a high enough income.
Does everyone get the standard allowance?
Most people do, but it can be higher or lower depending on your circumstances, such as the Marriage Allowance or adjustments in your tax code.

Last reviewed

Reviewed
Version 1.0.0

This guide is general information about the Personal Allowance and is not personal tax advice. Figures and thresholds change between tax years.